By Andria Cheng

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Like other retailers, Target is battling declining store traffic and consumers reluctant to spend, but in addition to those concerns, the company’s data breach still has a lingering negative impact on its customer service and reputation scores.

In Cowen & Co.’s Consumer Tracking Survey, conducted quarterly and for the first time since Target’s security breach news in mid-December, it found “meaningful decreases” in year-over-year customer satisfaction with both the total shopping experience and customer service in March. Satisfaction with the overall shopping experience at Target was down almost 2 percentage points in March, with declines “most acute” among middle-and-upper-income shoppers, analyst Faye Landes said, adding the higher-income shoppers are “key cohorts for Target”
/quotes/zigman/253872/delayed/quotes/nls/tgtTGT and a group more likely to hold credit cards than lower-income shoppers.

On customer service, Target’s scores dropped 3.3 percentage points to 71% with the score among upper-income shoppers falling a “dramatic” 9 percentage points to 70%, the survey of 2,500 shoppers showed. It also found that customer satisfaction with Target’s pricing, selection and product quality all declined from a year earlier.

“The obvious question is whether Target can regain the ground our survey indicates that it has lost with consumers,” said Landes, who rates Target underperform. “The answer may be yes but it is not only a matter of time but rather will entail efforts on the communication, marketing and product fronts as well as in store service. It’s apparent that significant issues linger.”

She said the decline in customer service may not be just due to the credit breach, but could be related to Target’s “ongoing efforts” to control expenses amid declines in traffic and sales.

Target’s credit rating was cut by S&P last week, as the rating firm said it expects the data breach to hurt the company’s traffic at least through the first half of the year.

Target spokeswoman Sarah VanNevel said the company is “taking extra steps” to win back shoppers. That includes providing limited-time deals like buy one and get one 50% off on swimwear and adding new merchandise including an upscale skincare collection. The company’s stock in late February had its best day in five years after it gave investors some comfort and said its sales and traffic have started to recover from the security breach, which has affected up to 40 million card accounts.

However, despite the year-over-year drop, some other measures showed Target’s reputation has indeed been recovering from its worst days.

Social analytics firm General Sentiment said sentiment surrounding Target on the web has returned to a positive 24 reading on average since March 15, compared with a positive 48 reading during the same period a year earlier.

In contrast, Target had a negative sentiment, at an average reading of minus 47, between Dec. 18 and Jan. 24 after the breach news. The reading was compiled from 1.65 million mentions across the web from Dec. 1 to April 1, General Sentiment said.

Separately, a YouGov BrandIndex measure of Target’s customer-perception level showed the level has returned to positive territory since Valentine’s Day and currently stood at a positive 12, meaning 12% more shoppers have a positive perception of the brand than those with negative perception. That compared with the reading of positive score of 25 to 30 on average before the breach. At its worst during the crisis, Target’s perception score plunged to a low of negative 35 on Jan. 13, YouGov said.

Target’s shares have gained 11% to $61.05 after declining to a 52-week closing low of $55.07 in February.

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About Behind the Storefront

Behind the Storefront is a blog about all things retail. It’s aimed at investors, shoppers and anyone else with a passion for learning about what drives consumer behavior. Hosted by Andria Cheng, Behind the Storefront will cover the business, brands and shopping behavior that’s behind some of the biggest companies, and largest employers, in the world. You can reach Andria at Acheng@marketwatch.com.